In 2023, global LNG demand growth registered a +2% y/y increase, and is forecasted to rebound with an average growth rate close to 5% in both 2024 and 2025. European and Chinese gas demand will primarily drive this uprise, as LNG intake is expected to accelerate in the short-term, in response to expansion of regasification capacity, and to support the transition from coal. Despite 2024 LNG supply growth being limited globally, reduced competition between Europe and Asia, and the expected new capacity entering the market in 2024 and 2025, are likely to guarantee adequate demand coverage, limiting the potential risk for supply shortages until winter 2024-2025. Fluctuations in LNG demand from European and Asian importers, determined by economic activity and meteorological conditions, and the progress status of the new expected capacity, will be pivotal in determining the global equilibrium in 2025 and 2026, with growth rate ranging above 7% in the high scenario.

Starting from 2026, LNG demand growth is expected to gradually slowdown, stabilizing just below 5% y/y, consistently with rising renewable energy production and improved energy efficiency measures. Conditional on the lack of further delays, a new wave of liquefaction capacity will enter the market by 2026, driven by US and Qatar, contributing to almost eliminating the risk of market tightness.

In the long-term, pressure on the LNG market is expected to ease, with new capacity growing and green energy commitments becoming effective.

The TTF 2023 average price settled just above 40 €/MWh, and based on our reference scenario, expectations for the 2024 yearly average are projected to establish close to 30 €/MWh. The persistence of subdued demand, not anticipated to rebound in the short-term, driven by structural changes in the energy markets and the recovery of RES production, induce price expectations to remain low. Europe LNG import capacity is poised to expand by further 30 Bcm in 2024, following the delay of under construction regasification facilities to that year or later. The development of European regasification capacity will increasingly enable additional LNG arrivals, crucial to maintain market equilibrium in the short-term and to structurally adapt to the absence of Russian piped gas.

From 2025 onwards, a gradual normalization is anticipated as a result of the significant deployment of new liquefaction capacity. Assuming a progressive normalization of the global LNG market alongside an acceleration of the energy transition, European gas prices are projected to steadily decrease towards €30/MWh by 2028.

The European decarbonization process would keep reducing gas demand, successively pressuring the price action back towards the 25 €/MWh long-term equilibrium. Only in the High scenario, persisting geopolitical and commercial tensions would leave commodities shortages unresolved, leaving prices just below 45 €/MWh in the long-term. Effective green policies supported by economic growth may lead prices significantly lower in the Low scenario, with the TTF averaging near 10 €/MWh in the long-term.

The PSV-TTF spread is expected to widen in 2024 following the closure of the OLT LNG regasification facility, averaging at 2 €/MWh. This is due to the increased reliance on flows from Norway via Passo Gries to compensate for the reduced availability of LNG. Fluctuations throughout the year are anticipated, driven by seasonal factors.

Flows from the TAP and Algeria, and LNG arrivals are seen as balancing imports in the medium-term, leading to a progressive spread closure to below 1 €/MWh by 2030.

The PSV-TTF spread is foreseen to reabsorb towards zero in the long-term, since a gradual flows rebalancing is expected to combine with the underlying decarbonization-induced demand reduction.

The 2023 PSV average price settled just below 45 €/MWh in 2023. In 2024, we anticipate a decrease in the PSV yearly average, with prices hovering around 30 €/MWh. This downward revision in PSV forecasts for 2024-2026 can be attributed to constrained gas demand recovery, which, in turn, stems from various factors. Firstly, gas consumption of the distribution network is anticipated to remain subdued amid a shift towards savings and efficiency. Limited growth in the energy-intensive sector and lower-than-average thermoelectric gas demand driven by sustained electricity imports and renewable electricity production on the rebound, will further limit national gas consumption. Delays in the commissioning of the Ravenna FSRU have also hampered gas demand recovery, falling short of initial expectations.

The PSV is expected to follow the European gas prices mid-term normalization towards 30 €/MWh by year 2030, as a gradual rebalancing of the global gas demand-supply dynamics should follow the expected acceleration of energy transition.

The PSV Reference price is expected to stabilize, aligning to TTF prices at around 25 €/MWh in the long-term.

The 2023 logistic cost for Italian gas-fired units averaged 4 €/MWh amid the increase of the CRVOS (which pays storage injections incentives), CRVBL (which covers the charges associated with the gas system balancing activity) and the CVU (which covers variable charges and it’s linked to the gas price trend) components. With the Consultation Document 588/2023/R/gas ARERA is evaluating the introduction of a Neutrality Charge of 2.2 €MWh from April 2024 (and for at least 3 years) to recover almost 4 Bln€ derived from the summer 2022 last resort buying activity put in place to refill the Italian storages. The overall gas transport cost should therefore remain above 4 €/MWh at least until 2026. The CRVOS component should reduce close to pre-crisis levels starting from October-2024 instead.

A gradual normalization of the average variable logistic costs is expected from 2027 on wards, following the normalization of gas prices, nearing 1.6 €/MWh on average by 2030.

In our Reference scenario, the 2024 CO2 price average is projected to approach 65 €/ton, driven by the gradual implementation of the ETS system reform supporting CO2 prices. The phasing out of free allowances for the aviation sector, reaching 50% of the total in 2025, along with the planned removal of 90 Mln permits from the market in 2024, are expected to begin exerting upward pressure on allowances prices by curtailing supply. From 2025 onwards, the progressive inclusion of the maritime transport sector will further boost overall demand. Concerns remain regarding effective demand recovery, which is anticipated to be limited over the next couple of years due to anticipated slow economic growth.

A notable widening of the supply-demand gap should manifest starting from 2026, as the maritime sector integrates into the ETS system and the phasing out of free allowances for aviation reaches full implementation. In addition, by 2030, the reinforcement of the Market Stability Reserve and the increase of the Linear Reduction Factor up to 4.4% will contribute to further tightening the market. As a result, CO2 prices are expected to accelerate, nearing just below 110 €/ton on average by 2030.

By 2034 the removal of free allowances for sectors covered by the CBAM will reach full implementation, inducing a further increase in allowances demand. The long-term targets would hinge upon the effective efficiency of the ETS System, with the CO2 price expected to exceed 120 €/ton in the Reference scenario by 2040, and potentially accelerate to just below 150 €/ton in the Low scenario, under the assumption of stricter decarbonization efforts in Europe to accelerate the prices increase.

The reduction of the electricity demand at European level, the recovery of nuclear plants capacity from the O&M maintenance of the last two years, and a surge in hydro production in Switzerland lead to an increase in the electricity import from the Northern borders. The positive trend of new RES installed capacity evidenced in 2023 will recur also in the two following years. Gas power thermal plants remain the marginal source.

Coal-fired units are going to phase-out within 2025, with the exception of the Sardinian ones, which remian operative until the completion of the Tyrrhenian Link in 2030. Electricity production from renewables will cover almost 50% by 2030. The normalization of commodities over time, and the Capacity Market (CM) mechanism will bring 7.3 GW of new thermoelectrict capacity, reducing the need for imported electricity.

Renewables will become the main source in the electricity mix, with a share of 70% by 2040. An optimization of the electricity grid, with the Tyrrhenian Link doubling in 2043, and the realization of the Elmed cable (Tunisia-Sicily) will reduce the need of net import from the Norther borders. Convenient market conditions would favor the development of energy intensive storage.

A swift rise in decarbonization solutions is supported by an increase in commodities’ prices, higher prices in the EU ETS mechanisms, and easier authorization for new renewables projects to encourage investments in the energy efficiency. Although coal units continue to operate, their share decreased due to more favorable conditions for gas-fired thermal plants, whose production will reach up to 33% of the national electricity demand by 2025.

By the end of 2028 coal-fired units in the are entirely phased-out. Falling renewables costs and a greater effort to reach decarbonizations goals support renewables development. In fact, the share of renewables production will reach 43% of the total electricity consumption. Improvements in the electricity grid will facilitate the reduction of electricity imported from neighborhood countries. Gas-fired thermal plants will continue to be the marginal source, cover 30% of the national electricity needs.

In the long-term, gas-fired thermal plants will be operative to guarantee system security and adequacy, even though the increase in storage system will down their share to 15% by 2050. Despite storage and network reinforcements the integration of renewables in the energy mix will only be partial reached as congestion and overgeneration problems are going to manifest, generating signals for electrolysis capacity.

Coal-fired thermal plants are still an important source of power, even though the reduction in the gas prices will increase the share of the gas-fired thermal plant, covering 35% of the demand. The increase in net import up to 47 TWh in 2025 reduce the need of coal to 5 TWh in the same year.

CM-led investments come online but the phase-out of coal-fired capacity is postponed, so as the realization of great network investments. Net imports will reduce to 36 TWh within 2030, and gas-fired production maintains a 40% quota of total electricity needs, as hydro production normalize aroung 46.5 TWh/y and renewable energy sources gradually increase their share in the mix.

Increase in CO2 price reduce coal generation competitiveness until 2035, when the entrance of the Tyrrhenian Link determine the phase-out of all coal units. Gas-fired production increases its share in the national energy mix to around 38%. Volatile DAM dynamics and RES development sustain the entrance of 10GW of energy intensive storage in the long-term.

Electric vehicles are assumed to increase up to 1.2 million in 2025, 4.5 million in 2030 and 11 million in 2040, bringing 2 TWh, 7.6 TWh and 18.7 TWh of additional consumption, respectively. In the Low scenario, a greater diffusion of electric vehicles leads 10.5 million in 2030 and 14 million in 2040. In the High scenario, e-mobility development suffers a 5-year delay compared to the Reference case.

The NIECP envisages 6 million electric vehicles in Italy in 2030 - 4 million are pure EVs (BEV: Battery Electric Vehicles) – accounting for about 8 TWh of additional electricity demand. In our Reference view we estimate additional 7.5 TWh to come from BEV and PHEV (Plug-in Hybrid Electric Vehicle). This means that our hypotheses consider a greater consumption per EV compared to NIECP figures. Main differences are most likely connected to the underlying assumptions about e-mobility applications in cities or long-term transport.

Notwithstanding the newest Green Deal proposals at EU level concerning transports, considering the uncertainty connected to the future expansion of a market which is still in a first stage of development, we assume a BAU trend in the long-term horizon, starting from the annual level of EVs addition reached in 2030.

H&C is expected to account for additional electricity requirements in a range between 2.5 TWh and 8 TWh in 2025, 4 TWh and 16 TWh in 2030, 7 TWh and 18 TWh in 2040, depending on the scenario considered.

Our assumptions lead to estimate 6.7 TWh of H&C consumption in 2030, corresponding to around 1.8 million installations for civil uses.

We assume a BAU trend in the long-term horizon, starting from the annual level of additional installations and consumption reached in 2030.

Law 91/2014 affirms that grid and general system tariff components should be applied to the electricity consumed and not only to the electricity withdrawn from the public grid. Following this approach, the exemptions accorded to RIU (Re Interne di Utenza) and SEU (Sistemi Efficienti di Utenza) and closed distribution systems, and the benefits currently in force for existing plants related to self-consumption will be at least partially removed for new subjects/projects that apply for similar mechanisms.

The excess of self-produced electricity that is not consumed by the industrial sites (self-consumption) and is thus sold on the market (differential between self-production and self-consumption) is expected to gradually decrease, consistently with the expected end-of-life of existing power plants that serve industrial sites.

In 2015, the approval of the European guidelines on capacity allocation and congestion management (CACM) introduced new parameters to be followed in the zonal configuration review process. In 2018, Terna began a process to review the zonal configurations in compliance with such rules.

The current zonal configuration derives from the base case proposed by Terna in compliance with the CACM. Differences compared to the previous configuration: (i) elimination of the limited production poles, (ii) inclusion of a new bidding zone corresponding to the Calabria region, (iii) displacement of the Umbria region from the Centre-North zone to the Centre-South market zone.

The zonal distribution of electricity demand is based on historical regional data published by Terna and subsequent econometric elaborations. In the Reference case, the zonal distribution of electricity needs is as follows: North (57%), Central-North (9%), Central-South (17%), South (7%), Calabria (2%), Sicily (6%), Sardinia (3%). Slight differences in such figures between the alternative cases are the result of the econometric elaborations performed.

According to Terna’s assumptions, almost 1.8 GW of coal-fired thermal plants capacity is going to enter the capacity market by 2025. The closures of coal plants will reduce the capacity from 2.8 GW to 1.5 GW within 2024 and 2025.

The first results of the 2024 CM auction show that around 1.8 GW of new gas-fired capacity has been procured and will enter the market between late 2024 and mid-2025. Auction results show also that Sardinian coal-fired capacity will not be substituted by gas-fired units, as only storage capacity was awarded in the island. Anyway, while coal-fired plants on the peninsula will be phase-out after 2025, Sardinian units are expected to operate until the Tyrrhenian Link infrastructure is fully completed (2030).

The amount of capacity auctioned through the CM is expected to grant full system adequacy at least through to 2030. No other thermoelectric capacity investments are envisaged after the wave of investment brought by the last CM auctions. Existing CHP power plants continue to support industrial acvities under the assumption of a BAU evolution of the industrial needs they serve. Some ageing CCGT capacity exit the market.

According to Terna’s assumptions, almost 1.8 GW of coal-fired thermal plants capacity is going to enter the capacity market by 2025. The closures of coal plants will reduce the capacity from 2.8 GW to 1.5 GW within 2024 and 2025.

The first results of the 2024 CM auction show that around 1.8 GW of new gas-fired capacity has been procured and will enter the market between late 2024 and early 2025. Sardinian coal-fired plants are phase-out in 2025 together with power plants located in the peninsula under the hypothesis of a quick realization of the Tyrrhenian Link infrastructure.

No other thermoelectric capacity investments are envisaged a􀅌er the wave of investment brought by the last CM auctions. Most of existing CHP power plants gradually exit the market, substituted by greener solutions. Some ageing CCGT capacity exit the market following strong competitive conditions.

According to Terna’s assumptions, almost 1.8 GW of gas-fired thermal plants capacity is going to enter the capacity market by end of 2025. The closures of coal plants will reduce the capacity from 2.8 GW to 1.5 GW within 2024 and 2025.

The first results of the 2024 CM auction show that around 1.8 GW of new gas-fired capacity has been procured and will enter the market between late 2024 and early 2025, and will continue to operate until 2030.

No other thermoelectric capacity investments are envisaged after the wave of investment brought by the last CM auctions. Existing CHP and CCGT power plants are remain operative. Realization of the Tyrrhenian Link in 2035 determine the phase-out of all coal power plants.

Due to reversed coal-to-gas switching conditions, the existing CCGT fleet is supposed to average about 2200 EOH in the 2024-2025 period in the Reference case. In the alternative scenarios, the diverse results depend on the different switching conditions: in the Low scenario, the 2024-2025 average is 2200 EOH, while in the High scenario the figure drops to 2000 EOH. In the same period, min-max performances of new, high-efficiency CCGTs range between 4000 EOH and 6300 EOH (considering the three cases).

After the phase-out of coal-fired units, the residual demand rebounds but existing CCGTs suffer the competition brought by sustained import levels and new high-efficiency competitors entering with the Capacity Market support. In the Low scenario, residual demand is furtherly reduced by the energy efficiency effect on consumption and the greater renewable penetration. In the High scenario, the progressive increase of residual demand is due to improving switching conditions.

Existing CCGTs (53%-efficiency) stabilize around 2400 EOH. In the Low scenario, the great renewable penetration influences competitive dynamics and existing units remain close to 1600 EOH. In the High scenario, the improvement of switching conditions is hampered by the high level of imports from abroad, with EOH of existing units over 2000 favored by phase-out after 2035. High-efficiency units stabilize below the 4800 EOH only in the Low scenario.

The decrease in the electricity demand is leading to a reduction in the coal production, reaching 1.8 TWh in 2025 in the Reference Scenario. In the High Case Scenario, the share coal production will amount to 4.9 TWh in 2025.

Coal phase-out in the different scenarios depend on the functionality of the main grid infrastructure (Tyrrhenian link). In the Reference case only the units in Sardinia will conue to operate after 2025 until the Tyrrhenian Link is completed in 2030. In the Low scenario all units will be phased out by 2025. However, in the High scenario coal-powered units may continue to operate until 2035.

Coal units remain operative only in the High scenario unll phase-out in 2035, with the entrance of the Tyrrhenian Link, with favorable conditions for coal switching price most of the units are going to be in an economical phase-out, only the most efficents remains operative.

In the Reference case, the potential for renewable development is considered based on recent trends, taking into account both bureaucratic and technical obstacles. This results in an estimated increase of 7.4 GW of solar and 2 GW of wind capacity. In Low scenario, there is a greater emphasis on achieving a decarbonized economy,with 10 GW of solar and 2 GW of wind power. High scenario, the growth of renewables is hindered by unfavourable economic conditions, resulting in an increase of just 5.4 GW and 0.6 GW of new solar and wind capacity, respectively, over the same two-year period.

Market parity conditions will accelerate the progress towards achieving long-term targets. In the Reference case, there is an ambitious plan for the development of renewables with an estimated 49 GW of solar and 16 GW of wind capacity by 2030, allowing to reach almost 50% of the energy demand. This scenario assumes a market-driven evolution of the sector. Low scenario reach 63 GW of solar and 21 GW of wind capacity by 2030, development achieved through a faster decrease in technology costs.

The Reference scenario predicts a continued increase in renewables penetration, with solar and wind capacity expected to reach 69 GW and 27.6 GW, respecvely, by 2040. However, an even faster transition towards achieving long-term decarbonization goals may be possible with the help of greater-than- anticipated investments in grid infrastructure and high-capacity energy storage solutions. These investments could enable an accelerated convergence towards meeting long-term decarbonization objecves.

In the next two years, solar and wind production are assumed to reach past 60 TWh and 65 TWh by 2025. In the Low scenario, instead, the greater amount of investments in decarbonization projects leads to achieve 40 TWh (solar) and 27 TWh (wind) in the same period.

Assuming a BAU evolution of the market and the elimination of perming process constraints in the next future, an 90% quota of the 2030 RES/GDC ratio target is expected to be achieved. Only a greener evolution of the Italian system is expected to be able to lead to the full achievement of the target (55+ %). The achievement of Green Deal targets – possibly RES/GDC around 70%, yet to be defined – would surely require a greater effort instead.

The reduction of technology costs and consolidated market parity conditions could allow solar production to almost quadruple and wind generation to more than triple with respect to 2022 values in 2040 in the Reference scenario. Boundary condiotions of alternative scenarios lead to different degrees of renewable development and production level.

BAU market conditions and moderate renewable penetration lead to a minimum risk of overgeneration in Reference and High scenario, while a more sustained increase in capacity installation in the south macro- zone could lead to overgeneration in some hours.

Greater penetration of renewable energy sources expected after 2026, there is a possibility of overgeneration starting to increase, which could result in almost 4 TWh of excess electricity in the Low scenario by 2030. The curtailment effect may be emphasized in certain local grid conditions. Moreover, during this decade, overgeneration is likely to be exacerbated by the rapid development of renewable energy sources in the southern regions of the country and the lack of adequate grid reinforcement.

In order to effectively manage the growing penetration of renewable energy sources and the associated overgeneration phenomena, the 2030s will require significant investments in grid reinforcements and high- capacity energy storage solutions. These measures will be crucial for balancing the grid and ensuring stable energy supply, especially in regions that are particularly prone to overgeneration. This excess energy production could provide opportunities for the installation of electrolysis capacity, which would not only help to take advantage of excess energy production but also support ongoing investments in RES.

In the long-term the development of renewable capacity, in particular in the southern zones, increase the presence of systematic overgeneration in the system, mainly in the islands. Grid investments and BESS are going to be insufficient to mitigate the problem, creating favorable conditions for green hydrogen, installed electrolysis capacity could reach almost 0.5 GW in the Reference scenario, concetrated in Sardinia. In the long-term, electrolysis capacity can effectively address overgeneration by providing a means to store excess renewable energy. Additionally, by increasing demand during periods of high RES production, it can help sustain prices and mitigate the cannibalization effect, particularly during the advanced transition phase.

Even if some increase in technology costs has been observable in the last year, the solar energy sector continues to achieve market parity; as baseload prices are expected to settle above 100€/MWh during the 2024-2025 period, solar power plants are projected to capture rates that are significantly higher than the estimated levelized cost of electricity (LCOE) across all scenarios. This indicates a positive outlook for the solar energy industry, which is likely to remain competitive and profitable in the near future.

Despite the potential cannibalization effect on unlevered projects located in southern regions, market opportunities for merchant investments are expected to strengthen in the coming years.

The long-term outlook from 2030 on wards appears promising for the renewable energy sector, as the ongoing reduction in technology costs and the adoption of improved PPA best practices are expected to support non-incentivized investments. However, the cannibalization effect could become a significant factor in certain regions, such as Sardinia and Sicily, where the grid infrastructure may not be capable of efficiently redirecting energy flows.

Wind market parity consolidates despite some increase in technology costs benefitting from the bullish trend of commodities that influence market prices. With yearly captured prices aligned to baseload prices, wind power plants are expected to achieve promising results, above the estimated levelized cost of electricity (LCOE) in all the scenarios.

Market opportunities for merchant investments are expected to consolidate, as wind assets do not suffer from cannibalization effects. Site-specific matters may however influence project economics.

Long-term perspectives from 2030 on wards are promising, following the continuous reduction of the cost of technologies and improved PPA best practices to support non-incentivized investments.

Within-day price spreads on the DAM could disclose opportunities for pumped hydro units, although the Ancillary Services Market (especially the real-me balancing phase) is expected to continue to be their main source of revenues.

Renewables development gradually increases the opportunities on the DAM. An accelerated development compared to the expected BAU trajectory could lead pumped hydro production volumes to reach 3.5 TWh in the Low scenario.

With a penetration of non-programmable renewable sources above 50% of total electricity needs, market opportunities furtherly increase: pumped hydro units help mitigate the solar cannibalization effect and help contain network congestions.

The first BESS (Battery Energy Storage System) projects are expected to come online in 2023 following the results of the Fast Reserve auctions held in December 2020. The pilot project proposed by Terna is based on the supply of a specific ultra-fast frequency regulation service paid with a fixed yearly capacity remuneration and is the first experience of development electrochemical storages in the italian market.

PI storages (1 hour of storage capacity) penetration is sustained by growing needs on the BM as non- programmable renewable capacity progressively increases, in the first years. After reaching the peak in the mid 20s, power intensive gradually contract, due to opportunities for converting their units in energy intensive storage to capture the increase volatile dynamics on DAM. Increased overgeneration and contractiion in ASM volumes reduce determine a gradual end in PI investments

Power intensive BESS capacity gradually disappear in the Reference and High scenario, progressively replaced by energy intensive BESS as they reach the end of the operational life, and remain available only in the Low scenario where higher RES capacity generate operativity signals on the ancillary service market.

2024 Capacity Market auction started the development of energy intensive storages in the Italian market, with more than 1.5 GW of new storage capacity – quite completely energy intensive (4 hours) – expected to hit the market by 2024 (possibly with some delays due to issue on the supply chain), with Sardinia and North to host about 0.8 GW and about 0.6 GW respectively.

The Day-Ahead Market presents promising market opportunities for merchant energy-intensive storage applications with a storage capacity of 4 hours. This is due to the increasing price spread volatility and the presence of overgeneration resulting from the development of renewable energy sources. Additionally, the gradual decrease in technology costs further enhances the attractiveness of energy-intensive investments.

Energy intensive applications reach an overall installed capacity of 22 GW in 2040. The larger installed capacity achieved in the Low scenario (near 31 GW in 2040) is consequence of greater opportunies both on the DAM and on the ASM.

The positive price spread between evening and central hours of the day is expected to persist in the short- term, as renewables penetration remains under 40% of gross domestic consumptions.

Sustained solar development will sharpen the price decrease in the central hours of the day, especially in correspondence of large sunlight availability and low demand levels (e.g., during spring), gradually closing the gap between peak and off-peak prices.

The reverse trajectory of hourly price differentials is expected to continue in the long-term, favoring the increase of prices in off-peak hours. The growing penetration of energy intensive electrochemical BESS and the generally greater operativity of storage units could dampen the cannibalization effect produced by non- programmable solar power plants.

In the second half of the 2020s, it is expected that existing CCGTs (Combined Cycle Gas Turbines) will benefit from the phase-out of coal-fired units in the peninsula and the growing demand, resulting in a baseload CSS (Clean Spark Spread) averaging around -1.7 €/MWh. However, this benefit will be challenged by factors such as the slowly decreasing trend of imported flows, intra-sectoral competition from CM- supported new builds, and the growing trend of renewables.

In the long-term, renewables are expected to dominate the generation mix. However, due to the decreasing trend of imported flows and increase in demand, existing CCGTs are favored and are expected to remain the marginal technology in the system for at least 85% of the hours.

The effect of solar production during central hours of the day is still moderate as penetration remains limited. Price differentials during attain the day current average levels.

As solar penetration increases and the cannibalisation effect intensifies, the spread between central and morning/evening peak hours increase. The development of single-axis tracker installations, grid reinforcements, and power intensive storages only partially contain such effect.

As within-day price differential and the number of hours in which prices reach 0 €/MWh increase, supporting investments in electrolysis capacity, time-shifting applications on the DAM become interesting and trigger new investments in energy intensive storage units.

CSS for existing CCGTs is expected to be slightly positive in the next year, as the power-plants will still represent the marginal technology in the Italian market scenario.

The market competition is expected to increase with the stable import flows from the northern borders, the rise in renewable capacity, and the entry of approximately 1.8 GW high-efficiency CCGTs, which were acquired through the 2024 Capacity Market auctions. These factors will keep the baseload CSS in negative territory. In the Low scenario, where renewable development is greater, and in the High scenario, where demand is lower, and the competition within the thermoelectric sector is stronger, this effect will be even more pronounced.

After 2030, a significant decrease in net import flows and the exit of some ageing capacity allow existing CCGTs (53%-efficiency) to remain the marginal technology in the system for at least 85% of the hours, with the baseload CSS around -1 €/MWh. Greater renewable penetration in the Low scenario, maintain the baseload CSS below 4 €/MWh also in the long-term. In the High scenario reduce renewable development favor CCGT production increasing the baseload CSS.

Captured CSS evolve depending on the zone mix, with southern bidding zones suffering the high operativity of coal-fired units and significant risk of operation at loss, while CCGT producing in the northern zone manage to guarantee positive margins at around 20 €/MWh , favored by the current market dynamics.

As renewable capacity increases, existing units tend to concentrate their operations during evening hours to maximize captured margins. The high-efficiency gas-fired capacity captured CSS is subject to competitive market conditions as new projects enter the market with support from the latest CM auction. Despite this, the high efficiency of these projects enables them to maintain an average captured margin above 15 €/MWh.

Growing renewable penetration intensifies overgeneration phenomena and accentuates evening price spikes, determining an increasing trend for captured marginality for existing units in the first half of the 2030s but load factors reduce progressively on increasing renewables share and increase competition from high efficiency units.

Solar power plants benefit of power prices, with captured prices around 133 €/MWh.

Increasing pace of installations and the consequent cannibalization and overgeneration effects – only partially limited by power intensive storages and grid developments – have an impact on zonal captured prices, which trend diverges compared to baseload prices.

The increasing occurrence of overgeneration serves as a market signal for the entry of energy-intensive storages, which partially mitigate the cannibalization phenomenon. After 2030, the cannibalization effect becomes more noticeable in the captured prices of solar energy, parcularly in southern market zones with higher renewable penetration.

Captured prices are aligned to zonal baseload prices and benefit from power prices, with captured price around 100€/MWh.

Captured prices remain basically in line zonal baseload prices also in the long-term. The overgeneration induced by the growing solar production has a major impact in the early 2030s, but the results of both sources remain more connected to zonal market dynamics than to the evolution of the price shape. Also, both sources benefit from a production profile which is more distributed over the hours of the day and over the year.

Captured prices are basically aligned to zonal baseload prices and benefit from high power prices.

Captured prices remain basically in line zonal baseload prices also in the long-term. The overgeneration induced by the growing solar production has a major impact in the early 2030s, but the results of both sources remain more connected to zonal market dynamics than to the evolution of the price shape. Also, both sources benefit from a production profile which is more distributed over the hours of the day and over the year.